Russian-Japanese Solid Bank plans to acquire a controlling stake in Kamchatprofitbank

The Russian-Japanese Solid Bank is ready to expand in the Russian Federation by purchasing the small Kamchatprofitbank. This asset is unlikely to be able to expand the presence of the sanctioned Solid Bank in the Far Eastern Federal District, but once it enters it will give a chance to return to the international payments market.

Solid-Bank plans to acquire a controlling stake in Kamchatprofitbank, follows from a message from Solid-Bank in the news agency “Kam 24”. The new banking group will continue to provide services to individuals, including those related to cross-border payments and foreign travel. The purpose of purchasing and creating a banking group is to increase capital and volumes of banking business, strengthen its position in the Kamchatka Territory, and expand the range of services for corporate and private clients in the region.

According to the Bank of Russia (available at the beginning of 2023), the Far Eastern Federal District (FEFD) cannot boast of a high level of penetration of banking services. In total, there are 14 banks represented in the region, for comparison: in the Central Federal District there are 208 of them.

Competition in the region is low, and there are prospects for development, including through M&A. “I believe that this transaction is a convenient way to expand your network, incurring relatively low costs, since the bank’s main shareholders were probably already looking for a buyer some time ago,” notes Ilya Zharsky, managing partner of the Veta expert group. According to the managing partner of the Dmitry Donskoy Financial Group, Dmitry Kurbatsky, Kamchatprofitbank was sold for quite a long time, the bank has a fairly low profitability even at current rates.

The parties conducted lengthy negotiations; a Kommersant source familiar with the situation estimates the time frame as “more than a year.”

The sale to Solid Bank was most likely an alternative to voluntary withdrawal from the market, Mr. Kurbatsky believes. “I don’t think that this deal will allow Solid Bank to make a breakthrough in business development,” the expert continues. “But since Solid Bank was under sanctions, the presence of a second bank in the group will allow payments to foreign jurisdictions for some time.”

Prices for collapsed banks, according to Dmitry Kurbatsky, where the license is primarily of interest, remain about one capital plus a premium of $1–1.5 million. “Here we cannot say that the bank has been collapsed, since there is a living one, although not very profitable business,” he continues. I think the transaction price in this case was around one capital.”

One of Kommersant’s sources suggests that there was a slight discount to capital.

However, against the backdrop of most transactions in the banking market, which now take place primarily in relation to the assets of departing foreigners, even this is a good result. In their case, discounts on sales are determined by the conditions of the Russian authorities: transfer to the federal budget of at least 15% of the cost and a discount of at least 50% to the market price.

“It will be interesting to see how Solid Bank, in the conditions of cooling international relations between Russia and Japan, will be able to preserve and, perhaps, increase capital for its shareholders,” concludes Ilya Zharsky.

Ksenia Dementieva, Olga Sherunkova